When it comes to selling a business, there is one big nontax reason that buyers generally prefer to arrange for an asset purchase transaction instead of a purchase of your ownership interest in the legal entity used to conduct your business (corporation, partnership, or multimember LLC treated as a partnership for tax purposes).

Big reason. The buyer does not want exposure to your business’s liabilities (known or unknown).

To ensure that liabilities aren’t attached to the assets without the buyer knowing it, the buyer generally insists that you, the seller, comply with the bulk sales law.

If the buyer is purchasing your ownership interest, say, the stock ownership in your corporation, you can expect the buyer to insist on additional due diligence procedures beyond the bulk sales law.

The purpose of this article is help you identify in advance the due diligence issues you likely will encounter with (a) an asset sale and (b) a sale of your ownership interest. ... Log in to view full article.